PRESENTATION
FINANCIAL LITERACY PROGRAMS
and
MINORITY INVOLVEMENT
BY: TORELL T. PERNELL
CHICAGO STATE UNIVERSITY
What Is a “Financially Educated” Person?
Most common definitions:
• being knowledgeable, educated, and informed on the
issues of managing money and assets, banking,
investments, credit, insurance, and taxes
• understanding the basic concepts underlying the
management of money and assets (e.g., the time value of
money in investments and the pooling of risks in
insurance)
• using that knowledge and understanding to plan,
implement, and evaluate financial decisions.
Designing Effective Financial Education
Programs
Incorporates at least four distinct elements:
• The topics - does the learner need information and education
about general cash flow management, credit, saving,
investment, retirement planning, estate planning, or some
combination of those topics?
• The audience – is the program targeted to the general public,
youth, low-income, first time home buyers, pre-retirees,
employees of a particular firm, or someone else?
• Learning styles – is the program set up for various learners
• Behavior stage – what is the learner’s current stage of behavior
change?
General research focuses on a few specific
questions
• Why is financial education important?
• What is “financial education?”
• What financial education initiatives are
underway?
• Are they working and how do we know?
Why is financial education important?
Pros
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More savings
More investments
Less debt
Homeownership
Bank accounts
401(k), pension
Higher credit score
Cons
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Less savings
Less investments
High debt
Low-income group
High prepaid cards fees
Lack of 401(k), pension
Lower credit score
The need for more minority financial
literacy
Recent data from the 2011 Consumer Financial
Literacy Survey:
 African American adults were less likely than
Caucasian adults to have learned personal finance
information from school.
 African American and Hispanic adults are
significantly more likely than Caucasian adults to
express concerns with assorted financial challenges
 African American and Hispanic adults, significantly
more than their white counterparts, strongly agree
that they could use answers to everyday financial
questions from a professional.
What is “financial education?”
• being knowledgeable, educated, and informed on
the issues of managing money and assets, banking,
investments, credit, insurance, and taxes
• understanding the basic concepts underlying the
management of money and assets (e.g., the time
value of money in investments and the pooling of
risks in insurance)
• using that knowledge and understanding to plan,
implement, and evaluate financial decisions.
Are financial education programs
working and how do we know?
• Some have shown positive results
• Some have shown minimal results
• Some have shown inconclusive results
• Assessment is based on:
▫ Current and past financial education knowledge
▫ Current and past behaviors in managing personal
finances
Methodologies
Included surveys, reports, and past research data
▫ the concept of financial education was explored to try to
establish a more definitive understanding and scope of
what is being researched
▫ the design of financial education programs was analyzed to
identify several key elements found critical to a successful
financial education program
▫ what financial education literacy initiatives were underway
▫ the effectiveness of such literacy initiatives were evaluated
Other metrics used:
• Knowledge
• Attitudes
• Behaviors and outcomes
o how much money has been saved?
o how much debt has been reduced?
o how much money has been invested?
Data sources
• Consumer Financial Literacy Survey, 2011
• JumpStart Survey of Financial Literacy Survey,
2012
• U.S. Department of Labor
• Institute on Assets and Social Policy
• U.S. Census Bureau
• The Federal Reserve Board
• The Urban Institute
Financial Education Resources
• Governmental agencies
▫ U.S. Federal Reserve Board
▫ Federal Deposit Insurance Corporation
▫ U.S. Treasury’s Office of Financial Education
• Private financial institutions
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Visa
American Bankers Association
Ariel Mutual Fund
Hewitt and Associates
Looking Ahead
• Several other evaluations of financial education
programs are will be conducted in the near
future
• The goal is to know much more about the
outcomes and impacts that financial education
has on individuals and their communities
• The Federal Reserve Board is beginning a
project that consists of a longitudinal evaluation
of their financial education program
• More financial institutions will develop and
support financial literacy initiatives
The relationship between information and behavior
Key points:
Research shows that financial education does not
necessarily lead to behavioral changes in personal
money management
Skill-building and motivation are two other issues that
must be considered when providing financial education
Automatic investment programs and governmental tax
incentives also help to provide motivation and to
contribute to behavioral changes
Cultural, economic, and environmental conditions play
a significant role in shaping the everyday financial
choices of individuals
Conclusion
• The goal of trying to determine clear and definitive links between
financial literacy and resultant positive financial behaviors is one
worthy of pursuit. When one considers the overwhelming need in
this day and age for financial literacy, it is clear that more must be
done to understand relationship between “knowing and doing.”
There are ample resources such as websites and informational
brochures readily available to individuals. However, these forms of
contact and outreach must be more tailored and designed to target
and meet the needs of certain groups of individuals. The way
individuals spend money is a personal matter and it is based on
several different reasons. Therefore, we need a clearer
understanding of why so many individuals with financial knowledge
often times fail to act on the information that they have already
obtained.